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Residential Status for Income Tax

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Residential Status for Income Tax

Residential status refers to a person’s status with reference to the question of how long the person has stayed in India for the past five years. The income tax liability of a taxpayer is based on the residential status in the financial year, and four years preceding the financial year. Also, while filing income tax returns, the taxpayer must declare the applicable residential status in the tax return. Under the Income Tax Act, taxpayers are divided into three categories of residential status, namely:

  • Resident but not ordinarily resident.
  • Ordinarily resident.
  • Non-resident.

Resident but Not Ordinarily Resident

An individual is a resident but not ordinarily resident in India in any financial year if the assessee fulfils any one of the following two conditions:

  1. The taxpayer is in India in a particular financial year for 182 days or more, or
  2. The taxpayer has been in India for at least 365 days in the four years immediately preceding a particular financial year and is in India for 182 days or more in that year.

Ordinary Resident

A person is said to be “not ordinarily resident” in India in any financial year if the person is-

  1. An individual who has been a non-resident in India in nine out of the ten previous years preceding a particular financial year, or has during the seven financial years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less; or
  2. Hindu Undivided Family (HUF) whose manager has been a non-resident in India in nine out of the ten financial years preceding the relevant financial year or has during the seven financial years preceding that year in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less. Thus, an “ordinary resident” would be a resident who is outside the purview of the above definition.

Non-Resident

An individual is non-resident in India in any financial year if the taxpayer does not fulfil any of the above-mentioned conditions required for a resident but not ordinarily resident and an ordinary resident.

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